Application of the Einstein Relation to Financial Data
: The Einstein relation which is known as the Fluctuation-Dissipation (FD) theorem in physics is applied to financial time series data in this paper. The fundamental equation for the time series is the generalized Langevin equation with colored noise. The autocorrelation function and the probability density function are derived from this equation and the Einstein relation. Those functions are then fitted to the sample autocorrelation and the histogram by means of nonlinear regression and all the parameters in this formalism are estimated consistently. This paper shows that the Einstein relation is useful in the stochastic time series analysis.
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Volume (Year): IX (2010)
Issue (Month): 1 (January)
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